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Aftershocks at Bear Stearns

In a week it was all gone: Bear Stearns' (BSC) reputation, culture, identity; the savings of many of its 14,000 employees; and possibly their jobs, too. "The speed of the collapse was traumatic," says one banker who has worked at Bear for a decade. "People aren't jumping out of windows," he says. "But we are all kind of anxious."

A year ago Bear Stearns was worth about $20billion. On Mar. 14 it was worth $3.6billion and fighting for its survival. Two days later JPMorgan Chase (JPM), egged on by the Federal Reserve, agreed to buy the 85-year-old investment bank for $2 a share, or $236 million. On Mar.24, JPMorgan, under fire for unseemly opportunism, quintupled the offer to $10 a share, or $1.2 billion.

But whether the bank was sold for $2 or $10 a share hardly mattered to many of Bear Stearns' employees who were regularly given stock and owned about a third of the company. In a chilling sign of things to come, local papers reported that the morning after the deal was announced, a real estate broker positioned himself outside Bear Stearns' Madison Avenue headquarters, offering his services to those who might need to sell their homes quickly.

A comedown of such magnitude would be traumatic for any organization. But Bear Stearns was a Wall Street outlier. Although the country's fifth-largest investment bank, Bear still considered itself the scrappy underdog. A former chief executive, Ace Greenberg, liked to say Bear hired people who were poor, smart, and had a deep desire to become rich. It was a place of sharp elbows, but if you succeeded you were part of a family.

Already, people are comparing Bear Stearns' collapse to that of a certain Houston energy trader that imploded a few years ago. "Among employees, I am seeing a similar sense of distrust as we witnessed after Enron," says Alden M. Cass, a psychologist who counsels Wall Street executives. Cass says he has received more inquires about his services from inside Bear than usual this past week.

WE WERE ROBBED

The circumstances around Bear Stearns' demise are unusual enough that employees aren't sure who they should hold most responsible: James E. Cayne, the chairman, or Alan D. Schwartz, the chief executive; James Dimon, the head of JPMorgan; or maybe Ben Bernanke and the Fed. "Everyone believes they were robbed. And no one knows who to blame," says a managing director who has worked at Bear for four years.

There is one person some are still looking to with hope: Joseph Lewis, the British investor who owns an 8% stake in Bear Stearns. He said in a filing with the Securities & Exchange Commission he would try to block the deal. Employees "are holding on to him like he's a savior," says Cass. "He's giving them a sense of control." Even as JPMorgan bankers were starting to work in Bear's offices, says the managing director, "people were going into conference rooms to discuss Lewis' moves."

Within the next couple of weeks, people expect the layoffs at Bear to begin. JPMorgan has already given general guidelines for what people can expect in terms of retention bonuses and severance payments. Of course, this is not a great time to be looking for a job in finance. "We'd tell employees to look forward," says Richard A. Chaifetz, who runs ComPsych, which provides corporate counseling services. "Have they rethought what they want out of a career? They might find something more fulfilling."